I founded AppSheet in Seattle in early 2012. The company was acquired by Google at the start of 2020 just before the pandemic took over our lives. This is #2 in a series of articles to capture some of my experiences. Here was article #1. Every startup journey is different, and my perspective is probably over-fitted to my unique situation. So please read with skepticism and treat these articles as opinions at best.
You don’t do a startup because your head tells you to. You do it because your heart wants you to.
Having made an emotional decision to do a startup, you have to start using your head. There are a few things you have to think about rationally and get right: (a) some foundational basics, (b) forming the nucleus of the team, and (c) what you choose to work on. Let’s look at each of them. In each case, you want to avoid mistakes that will dog you for years. Small correctible mistakes are just fine — you’ll make so many of those, you’ll just brush them off.
This is the boring stuff but have to cover it. I’m going to assume you’re following the traditional path of a startup that hopes to swing for the fences and maybe maybe become a valuable enterprise one day. There’s other models, but I just don’t know enough about them.
First and foremost, get a good legal firm. Good corporate lawyers cost somewhere from $750 to $1000 an hour (their paralegals thankfully cost less). If it is less than that, do not hire them. If you are going in for a serious surgery, I suspect you want the best surgeon operating on you. Same sort of rationale here. Most firms will give you some kind of deal to defer payment for the first $10K or so. If it is not a top firm, do not hire them. If they don’t come strongly recommended by someone who has done a startup all the way to a successful outcome, do not hire them. Just like any other profession, a famous law firm will have good lawyers and not so good ones, ones who care about you and ones who don’t. If you interview them and you do not like them, do not hire them. It is straightforward to set up a Delaware corp, stock plan, etc but lawyers can still mess it up and that’s why you go with the best. Any mistakes you make here won’t matter when the company is small and struggling, but if you get to a funding round or acquisition, it will really matter what you did initially.
So at this point, you’re thinking, boy Praveen’s talking like money grows on trees. Nope. I was cheap. Stingy. Thrifty. I hated spending money. At the early stage of a company, money is insanely expensive. Let me explain. Any money a company gets is either from revenue (but you have none) or it is money provided in exchange for stock. So really, at the start, somebody (probably you or co-founders) puts in personal money for stock. And when that money is used up, you are selling stock, one way or the other, for more money. In the early stages, your company’s stock is of very little value, so a little money is worth a lot of stock. Once you become the next rocketship decacorn of course, that same stock is worth a huge amount. So yeah, be absolutely frugal about spending money early, except on crucial stuff (like company formation legal documents).
You may need a part-time accountant to do a few hours each quarter on book keeping, filing taxes, registering your business in your town, etc (not expertise you should spend time on). You may rent a small office space (in some post-pandemic world) — I sat in the library with my laptop until I had a co-founder and then we rented some cheap desks in a co-working space. Spend just enough so that you can focus on the core things your company is about but no frills.
There’s only one thing worse than spending unnecessary money. That is paying for services with stock. Do not give someone stock instead of paying their $500 invoice. Yeah, Mark Zuckerberg paid for some mural with Facebook stock and the painter got rich. Unless your initials are M Z and you don’t believe in privacy either, don’t emulate him. Pay for services the normal way, with money. Does this sound like a catch-22? Well yeah but not really. You have to be prepared to put some personal money into the company at the start to get it off the ground. Enough to cover your costs at this stage. And the less you spend, the less cash you need.
Ok, done with the boring stuff.
The nucleus of the team
Obviously you need an initial team that is talented, skilled and capable in the areas your business cares about. But going beyond that, there’s six types of motivations for people who join a startup. I call them the “6 Ms” :
- Me: ego (in a good way), show what one can do, have personal impact on the world
- Money: generate value, get rich
- Mission: care about the outcomes of the work, or the people impacted, or the approach
- Method: care about the technology, the engineering details, the craft
- Morale: care about one’s colleagues, work-life continuum
- Morality: a sense of what is right vs wrong
For a company to thrive, the founding members of the team need to collectively embody many of these motivations. The individual motivations of the founding members and their relative influence on each other establish the long-term values of the company. This nucleus of founding members matters immensely.
You are very fortunate if you have the right set of co-founders at the very beginning. In fact, it is difficult to know if it is the right set until you are partway along the journey. It may also take some time to assemble the co-founders. In my case, Brian Sabino joined me 6 months after I started, but really in those 6 months, I hadn’t gotten anywhere (I was still in detox). We spent the next year and a half through a series of failed pivots sustained only by foolish stubbornness. When we hit on the idea of AppSheet it was really a last ditch thing before shutting down the company. I had the idea in November 2013, and Brian’s reaction was “it’s no more insane than anything else you’ve come up with, so if you want to give it two months, I’m cool with it”. Another six months later, Phil Garrett joined us. And then we had our founding members.
I first met Brian in 1998 when he attended a graduate course I taught at Cornell. Then, after I joined Microsoft in 1999, he joined there a year later and we worked on adjacent teams. So I already knew him for about 15 years, not very closely, but still you get comfortable with people over time and you hear what others say about them and you form your opinions. So there was a basis of trust and respect.
Phil started working in the software industry in the late 60s. I first met Phil in 1999 when I worked at Microsoft and we worked closely on the same team. We worked daily and closely for four years and have stayed close ever since. I admire his wisdom, humility, and work ethic. When I grow up, I want to be like Phil. I trust him implicitly and he’d worked closely with Brian too.
On the M’s, I represented Me and Mission. Brian really cared about Morale (the team he works with). Phil cared about Method and Mission. None of us knew much about or cared much about making Money. Over time, I learned a lot more about that but the other two didn’t. We all had a strong shared sense of Morality. But the thing is, we knew all this about each other already before we started, and that was the special superpower we had.
No founding team is perfect. Most of them have their flaws and for sure, we had our flaws. The biggest flaw was that all of us were engineers and none of us had any experience creating or running a company. A startup can create a lot of inter-personal stress. Of course, we argued and disagreed on things, but on the whole, our startup was lower stress than it had any right to be. For the journey to be worth it, your companions must be people you know and trust and love. They are the only people who will forgive you every time you screw up.
One last thing on this topic. A company isn’t a democracy. The founder/CEO has much more power than everyone else, especially on things like compensation and stock awards (I’ll talk about team compensation in the next article). In an early stage startup, there is almost no scrutiny of what a founder/CEO chooses to do. So the morality (interpret that broadly as fairness, ethics, values) of the founder/CEO matters immensely. If you are considering joining a startup as a co-founder or an early employee, make sure you believe in the morality of the CEO. This will turn out to be much more important than the CEO’s business acumen or technical intuition. Those things can improve as the company grows or can be augmented by others. However, when the stakes increase and the stresses multiply, you need the CEO to do the “right thing” by everyone although nobody is watching.
What you work on
I’m not qualified to talk about what to work on, what problems to solve, etc from the viewpoint of market/customer/revenue/etc. There’s many things a startup could do and there’s all kinds of advice on how to explore and validate those ideas.
Whatever it is though, the people who join the team need a shared belief that it matters. I’ve rarely seen a successful team that didn’t have a reality distortion field around its mission. At AppSheet, our mission was to “empower ordinary people to create software”. We talked (in a sort of lowkey way) about a revolution for the billions who cannot write code but have valuable ideas for software applications. I thought it was compelling. I still think so today. All the same, our company never looked like it was going to be a winner. In fact, there was little evidence it would ever be close to a winner. We didn’t have lots of funding and therefore couldn’t pay the salaries to compete with the big tech firms or even other startups. Nobody joined our company with the thought that they’d actually make money. But we attracted idealists for whom the mission mattered and the people mattered.
Though to be honest, most missions are less compelling from the outside than they seem on the inside. I guess you need the combination of the ability to drink the Kool-Aid and also the humility to recognize that your mission is a long-term dream not a short-term goal. No offense to UIPath but their mission is: “We envision a world with a robot for every person.” Ahahaha. Ok. <Over roughly the same period of time that we did AppSheet, UIPath grew at an amazing pace and generated several hundred times the value we did. So it is fine to poke friendly fun at them. They won’t take it too badly.>
The other thing is not to aim too low. When we started, I received a lot of really bad advice on this topic. It was a time when Seattle didn’t really have the many startup unicorns it has now, so maybe times have changed. There was a lot of advice to find a niche, and then do something to own and optimize that niche. Versus trying to create some kind of broad game-changer. I mean, if I’m going to spend a decade of my life working on something, why would I go after a niche? Most of this advice came from early-stage investors in Seattle. Quite literally, I’d talk to investors in Seattle and they’d tell me I was thinking too ambitious. Then I’d get on a flight to the bay area and investors there would tell me I was thinking too small. This feeds into some of my learnings about types of investors, their risk tolerance, their risk horizon, and aligning their motivations with your company’s motivations.
That’s perhaps a good place to break. Because the topic of investors and funding is an entire not-so-uplifting article (Article 3) in itself. And talking about the team and how to think about it is a whole other topic that needs its own mostly uplifting article.
“… There might have been things I missed
But don’t be unkind
It don’t mean I’m blind …”
— — Emerson, Lake, and Palmer. From the Beginning